For years, financial professionals have closely monitored the scheduled expiration of the Tax Cuts and Jobs Act of 2017 (TCJA), anticipating how its sunset at the end of 2025 might impact planning strategies. Now, with the passage of the One Big Beautiful Bill Act (OBBBA), some of those questions have been answered.
The new legislation not only makes several TCJA provisions permanent but also introduces a range of new, time-sensitive tax changes affecting both individuals and businesses. While the full text of the law spans nearly 1,000 pages, we’ve summarized below some of the key provisions most relevant to the individuals and businesses we serve.
If you’re wondering how these changes may affect your personal financial situation—or what planning opportunities they may present—this summary is a good place to start.
Individual Tax Provisions
- The current income tax brackets, originally set to expire on 12/31/2025, will now remain in place indefinitely.
- The lifetime estate tax exemption will increase to $15 million per person in 2026 (up from $13.99 million in 2025). It had been scheduled to revert to 2017 levels at the end of 2025.
- The standard deduction will be permanently increased and adjusted annually for inflation beginning in 2026. For 2025, the standard deduction will increase to $31,500 for joint filers (up from $30,000) and $15,750 for single filers (up from $15,000).
- The child tax credit will increase from $2,000 to $2,200 for 2025, with inflation adjustments beginning in 2026.
- The State and Local Tax (SALT) deduction cap will increase from $10,000 to $40,000 for 2025, before reverting to $10,000 in 2030. The increased deduction will be reduced by 30% for Modified Adjusted Gross Income (MAGI) above $500,000 and fully eliminated at $600,000.
- From 2025 through 2028, taxpayers over age 65 will be eligible for a new $6,000 deduction. This amount will be reduced by 6% for Modified Adjusted Gross Income (MAGI) starting at $150,000 for joint filers, with a full phaseout at $250,000 ($75,000 to $175,000 for single filers).
- A new deduction is available for qualifying overtime income, limited to $25,000 for joint filers and $12,500 for single filers. The deduction phases out between $300,000–$550,000 MAGI for joint filers ($150,000–$275,000 for all others). Qualifying overtime income must be reported on the W-2 and remains subject to Social Security and Medicare taxes. This deduction will only be applicable for the 2025 – 2028 tax years.
- Beginning in 2026, the Alternative Minimum Tax (AMT) phaseout ranges will be lowered. For joint filers, the range will be approximately $1,000,000 – $1,275,000; for single filers, $500,000 – $672,000.
Charitable Giving Provisions
- Beginning in 2026, taxpayers who do not itemize deductions will be allowed to deduct cash charitable contributions up to $2,000 for joint filers ($1,000 for others).
- For those who do itemize, charitable deductions will be subject to a 0.5% Adjusted Gross Income (AGI) floor. For example, a taxpayer with $200,000 in AGI would not be able to deduct the first $1,000 of charitable gifts.
- Beginning in 2026, C corporations will also be subject to a charitable deduction floor of 1% of taxable income. For example, a C corporation with $2,000,000 in taxable income could not deduct the first $20,000 in charitable donations.
Business Tax Provisions
- The OBBBA permanently restores 100% bonus depreciation for qualifying property placed in service during the first taxable year ending after January 19, 2025.
- The Section 179 expense limit will increase to $2.5 million (up from $1 million), with the phaseout threshold rising to $4 million (up from $2.5 million).
- The Qualified Business Income (QBI) deduction for owners of pass-through entities will remain in place.
Miscellaneous Changes
- Beginning in 2026, 529 plans can be used to pay up to $20,000 in tuition for elementary or secondary school, doubling the current $10,000 cap.
- The childcare tax credit will increase from 35% to 50% of qualifying expenses. A new phaseout schedule will gradually reduce the credit to a minimum of 20%.
- Starting July 4, 2025, 529 funds can be used to pay for recognized postsecondary credentialing programs.
Final Thoughts
The One Big Beautiful Bill Act brings meaningful changes to the tax landscape, with both immediate and long-term implications for individuals and businesses. While this summary highlights several of the more notable provisions, every financial situation is unique—and so is the potential impact of these updates.
This information is provided for general informational purposes only and should not be considered tax advice. We strongly encourage you to consult with your CPA or qualified tax advisor to determine how these changes may affect your individual circumstances.
If you have any questions about how this legislation could impact your financial plan or would like to discuss possible next steps, please don’t hesitate to reach out to your Client Advisor. We’re here to help you navigate these changes with confidence and clarity.
SOURCES:
Taxfoundation.org – “One Big Beautiful Bill Act” Tax Policies: Details & Analysis
Congress.gov – H.R. 1 One Big Beautiful Bill Act
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